Prices will rise this year probably at a faster pace than during 2012 for the simple reason that demand exceeds supply at current prices. The housing affordability debate will grow and the crisis for low income earners in Auckland particularly will worsen. Investor interest will spread out of Auckland while some home owners will cash up and shift to more affordable areas with cash freed up for retirement spending. Construction costs will rise and no moves will be taken which radically shake up the building materials sector or availability of land or rules and fees for developing it. Chinese buying in Auckland then other centres will become more evident. Rising overall net migration inflows will spark debate.

A couple of weeks ago the NZ Property Report appeared showing that during December there were 8,482 properties newly listed for sale around New Zealand. That was a 2.9% decline from a year earlier but because sales have grown strongly the result means that the number of weeks supply (total stock measure) has dropped to a five and a half year low of just 26.6 from 37.5 a year before.

 

As we have long been pointing out, there is a very simple Economics 101 shortage of dwellings in New Zealand and prices will rise.

 

Auckland Sales Strongest Since 2003 – But This Time Without a Migration Boom!

 

Last week Barfoot and Thompson reported that during December in Auckland they sold 920 properties. This was a strong 29% rise from a year earlier and the highest December total since 2003. Busy in other words. The number of new listings received was down by 18% from a year earlier while total listings stock at the end of the month was 6% off from a year ago at 4,310 properties. As a result the ratio of sales to listings over the past three months stood at 26.3% compared with 15.9% a year ago. This also is the strongest result since 2003 and is yet another measure showing a listings shortage.

 

But an extremely important thing to note however is this. Back in 2003 the market in Auckland was to a substantial degree being driven by a strong net migration inflow which for the country as a whole amounted to 35,000. This time around however the net flow was a loss of 1,567 in the year to November (latest data). More than that, this latest net loss was better than 3,653 six months earlier and the trend is toward the positive. Meaning – as we have noted here previously, if this is what the Auckland market looks like with a net nationwide population loss, imagine what will happen when the net flows turn positive as we expect they will this year. Hence the chances are high that over 2013 Auckland house prices will gain by more than they did over 2012.

 

Housing Supply Trending Upward

 

In seasonally adjusted terms the number of consents issued for the construction of new dwellings fell by 5.4% in November after easing 2.6% in October. This still leaves consent numbers ahead 7% for the quarter or by 9.2% if we exclude the volatile apartment numbers which went from 168 in October down to only 39 in November.

 

On average over the past decade 22,400 consents have been issued each year. The latest total is 16,675 therefore still 25.6% below average though up 23% from the year to November 2011.

 

Nationwide Prices and Sales Up Over The Year

 

The REINZ reported on Tuesday that during December there were 5,754 dwellings sold around New Zealand which was an 8% rise from a year ago. Sales for the year totalled 74,000 exactly which was a 20.8% rise from 2011 and well up from the cyclical low of 53,463 in February 2009. The pace of sales growth on a year ago has slowed down and this could be because stock is in short supply – hence prices are rising. The REINZ price measure which adjusts for changes in the types of houses sold was ahead 6.7% in December from a year ago. Smoothed over the December quarter the rise was 7% on a year earlier with Auckland up 12%, Wellington 2%, Christchurch 7.5%, and section prices 4.4%.